SK Hynix posts surprise Q4 profit on AI chip demand

By Joyce Lee and Heekyong Yang

SEOUL (Reuters) -South Korea’s SK Hynix Inc said on Thursday it will focus on high-end chips for artificial intelligence this year, after strong demand for such semiconductors drove a surprise profit in the fourth quarter.

The world’s second-biggest memory chipmaker reported a 346 billion won ($259.8 million) operating profit for the October-December quarter, versus a loss of 1.9 trillion won a year earlier and a 1.8 trillion won loss in the third quarter.

The results beat expectations for a 192 billion won operating loss according to 23 analysts’ views compiled by LSEG SmartEstimate, weighted toward analysts who are more consistently accurate.

“We achieved (a) turnaround … following a protracted downturn, thanks to our technological leadership in the AI memory space,” said CFO Kim Woohyun. He added that SK Hynix will strive to “grow into a total AI memory provider”.

Hynix’s results outpaced market expectations as strong appetite continued for its advanced DRAM chips such as high bandwidth memory (HBM) chips used in generative AI.

SK Hynix is expected to begin mass production of the next version of HBM, called HBM3E, in the first half of the year.

The company had been ahead of rivals in developing the current version, called HBM3, and counts AI-chip leader Nvidia as a key client.

SK Hynix said its sales of HBM3 chips increased by more than fivefold on-year, adding it is also developing the next generation, called HBM4.

Its lead in HBM chip development could help SK Hynix improve profitability and production yields of the high-end chips ahead of rivals, and outperform the market throughout this year, analysts said.

Chinese mobile makers resuming chip purchases after using up their own chip inventory also helped memory chip prices rebound in the fourth quarter, buoying profit, analysts said.

Its bigger rival Samsung Electronics is also expected to flag improving memory chip demand when it reports detailed fourth-quarter results on Jan. 31.

SK Hynix last posted an operating profit in the third quarter of 2022, before last year’s worst industry downturn in decades due to weak consumer demand.

Revenue rose 47% on-year to 11.3 trillion won.

($1 = 1,331.9400 won)

(Reporting by Joyce Lee and Heekyong Yang; Editing by Stephen Coates)